Revenue Per User (RPU)

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Definition: Revenue Per User (RPU)

Revenue Per User (RPU) can be defined as a metric to measure the revenue of a company on the basis of its total number of users. The formula for calculating the metric:

RPU = Total Revenue/Total Customers (or users in case service).

This ratio is generally used by the telecom operators to better understand their business. This metric helps in determining which product lines or service is most profitable and hence its customer relationships are most important. Also it uncovers which product or service lines operate at low profitability and what may be the reason for it. Generally Average Revenue per User is used as it is a better indicator of profitability.

The formula for average revenue per user is:

ARPU = Total Revenue / Number of Subscribers.

Suppose a local provider makes $500,000 worth of revenue. Also assume it has 1000 customers.

Revenue Per User = $500,000 / 1000 = $500

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